Obama's "Making Home Affordable" Plan

On March 4, 2009, the Department of the Treasury released new guidelines to banks for the Making Home Affordable program. The full guidelines can be found here. These guidelines are used by many banks to qualify homeowners for a Refinance or a Loan Modifications.

Here is a summary of the eligibility requirements:

1. You have a Fannie Mae or Freddie Mac mortgage
2. You must have solid payment history on your loan (less than 30 days late on any payment)
3. Your loan originated on or before January 1, 2009.
4. Owner Occupied dwelling - status will be verified
5. First Lien Loans - if you have 2 or more mortgages, only the first will be affected

What does this mean for those of us in the lower Hudson Valley in New York?

Not too much. Housing prices here have been higher than what Fannie Mae or Freddie Mac were willing to lend on. As a result, very few if any loans are Fannie Mae or Freddie Mac loans so very few if any will qualify for a Refinance. You may qualify for a Loan Modification, though. Use the self-analysis tool to see if you qualify.

Also, the guidelines seem intended to help people who are current on the mortgages. If you’ve missed a payment, you may not qualify.

The Making Home Affordable program is also trying to have lenders reduce monthly payments so that they are NO MORE than 31% of your GROSS INCOME (click here to check your payment). The lenders will go through scenarios to see what payment plan will get you to a payment that is 31% of your gross income or less. This monthly payment is to include:

• Principal
• Interest
• Taxes
• Insurance
• Flood Insurance
• Homeowner’s Association/Condo Fees

Homeowners should be mindful that the lender is still entitled to a return on their investment. They lent the money and are entitled to a return on that money in the form of interest. If reducing the payment to 31% of your loan does not allow the investor a return on their investment, they will most likely not approve a Loan Modification. When might this happen? Well, property taxes in the NYC area are very high. Take your total taxes and insurance payment for the year and divide by 12. This is your monthly tax/insurance escrow payment. If this escrow payment takes up a large portion of your monthly loan payment, your lender may not be able to make any money on from the mortgage. In this case, they may deny the modification.